Category Archives: Dividend Achiever Watch List

U.S Dividend Watch List: August 26, 2016

Previous Year Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from August 28, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2015 Price 2016 Price % change
HY Hyster-Yale Materials Handling, Inc. 61.38 52.52 -14.4%
TIF Tiffany & Co. 83.61 73.56 -12.0%
VAL Valspar Corp. 74.20 105.46 42.1%
WSBC WesBanco 30.30 32.12 6.0%
SJI South Jersey Industries 24.47 29.77 21.7%
      Average 8.7%
         
DJI Dow Jones Industrial 16,643.01 18,395.40 10.5%
SPX S&P 500 1,988.87 2,169.04 9.1%

Our average gain from the top five companies was 8.7%. The biggest gain came from Valspar (VAL) (+42%) which received a take over bid from Sherwin-Williams. The biggest decline came from Hyster-Yale Materials (HY). Although we view Hyster-Yale as a company with strong balance sheet, we expected shares to trade lower as expectation were lowered. Below is an excerpt from last year.

Statistically, the HY has decent fundamentals. The company returns 6.7% on its capital and 19% on equity invested. With total cash on hand of $99 million, $54 million in total debt, and $72 million in free cash flow, the company would likely survive the next recession with a strong balance sheet. The street is expecting profit to rise 15% but we'll suspect that a revision downward will occur in the weeks to come and possibly drive shares even lower. Because of the strong balance sheet, further analysis of this company is highly recommended.

U.S. Dividend Watch List: August 26, 2016

The S&P 500 lost 0.7% for the week but remain close to its all-time high. At the end of the week, there are 15 companies on our watch list. Continue reading

U.S. Dividend Watch List: August 5, 2015

It was another strong week for the market and the continued to make new all-time high. The average was up 0.43% for the week and the Dow gained 0.6%. At the end of the week, there are 10 companies on our watch list. Continue reading

U.S Dividend Watch List: July 22, 2016

Previous Year Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from July 24, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2015 Price 2016 Price % change
INTC Intel Corp. 28.06 34.66 23.5%
LECO Lincoln Electric Holdings Inc. 57.72 61.55 6.6%
ANDE The Andersons, Inc. 35.32 36.70 3.9%
EMR Emerson Electric 50.68 55.81 10.1%
ARG Airgas Inc 98.88 142.95 44.6%
      Average 17.8%
         
DJI Dow Jones Industrial 17,568.53 18,570.85 5.7%
SPX S&P 500 2,079.65 2,175.03 4.6%

The average gain of the top five companies was exceptional. Average price gained 17.8% with Airgas (ARG) leading the way with 44.6%. Air Liquide announced an acquisition of Air Gas in mid November. We didn't elaborate more on Airgas and in many ways, we wished we did. However, we did touched upon Intel (INTC) and Lincoln Electric (LECO). Below are excerpt from prior year list.

If we look at the current fundamental figure, Intel (INTC) fell to $28 and has dividend of 3.4% which the company has no problem sustaining. Multiple of 12 appears to be low but one should expect the analysts to revise their projection down and bring 2016 EPS estimate down. We guess that F P/E would sit at 15 by the end of next year. As such, shares accumulation at current level is very enticing but with expectation that another 15-20% downside risk is highly likely and a second or third purchase will be needed.

The company (Lincoln Electric) has relatively high profit margin at 10%, return of equity of nearly 20%. Lincoln has $290M in cash, total debt of $170M, and leverage free cash flow of $375M. Based on this information, it's fair to say that the company has strong balance sheet and one shouldn't worry about the debt payment. Dividend payment of $1.16 equate to 2% yield and 30% payout ensure that dividend payout will remain certain. Back in late 2014, the company increase its payout by 26%. While that level of increase will not be likely in the year to come, we speculate that a double growth in dividend would still be likely. Income investor willing to build position now, may want to start researching the story of Lincoln and get comfortable with its tie to China.

We hope that our ongoing review of our prior work serve to benefit us and our readers.

U.S. Dividend Watch List: July 22, 2016

It was another good week for the bull as equity continued to progress higher. The S&P reached another all-time high and ended the week up 0.6%. As our name suggested, we are not one to recommend adding new capital when equity is at the high. The mantra of "buy high and sell higher" does not fit our risk profile so be advice when putting new capital to work at this level. Below are 7 companies appearing on our dividend watch list. Continue reading

U.S Dividend Watch List: July 8, 2016

Previous Year Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from July 10, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2013 Price 2014 Price % change
MGRC McGrath RentCorp. 28.60 30.92 8.1%
NFG National Fuel Gas 55.19 55.93 1.3%
EMR Emerson Electric 53.83 53.44 -0.7%
LECO Lincoln Electric Holdings Inc. 60.17 59.56 -1.0%
MUR Murphy Oil Corporation 40.06 30.66 -23.5%
      Average -3.2%
         
DJI Dow Jones Industrial 17,760.41 18,146.74 2.2%
SPX S&P 500 2,076.62 2,129.90 2.6%

The average return of the top five companies was below our expectation with a loss of 3.2%. The market on the opposite end gained more than 2%. Largest decline came from Murphy Oil (MUR)

which was hit hard by the decline in oil price. Back in 2014, Murphy earned more than $900M in net income but saw that figured sink to nearly $2.4B in losses. The best performer was McGrath RentCorp (MGRC) which provide modular buildings for rent. While net earning declined year-over-year, investor paid more for the company and pushed the earning multiple from 16 to 19. As such, the stock rose by 8%. Continue reading

U.S Dividend Watch List: June 24, 2016

Previous Year Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from June 26, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2013 Price 2014 Price % change
MON Monsanto 105.21 104.07 -1.1%
NSC Norfolk Southern Corporation 88.87 82.64 -7.0%
WMT Wal-Mart Stores 72.12 71.96 -0.2%
CVX Chevron Corp. 98.60 101.90 3.3%
PPL PP&L Corporation 29.75 37.18 25.0%
      Average 4.0%
         
DJI Dow Jones Industrial 17,946.68 17,400.75 -3.0%
SPX S&P 500 2,101.49 2,037.30 -3.1%

The average return of our the top five companies exceeded the market's performance by a good margin. The best price performance came from a utility company, PP&L (PPL). The search for safety and income was likely the main driver. The worst performer was Norfolk Southern (NSC) which lost 7% of its value.

We touched on Wal-Mart (WMT) briefly in our review. The stock was trading at $72 but dropped as low as $56. We didn't provide any downside target which could have been beneficial because the stock has traded back to $72, a +28% gain from the low. While we mentioned that a rise to $90 isn't likely anytime soon, a rise from the mid-$50s to $70s isn't far fetched. Technically speaking, the stock may have put in the low at $56. Any buying from this point may use the 150 or 200 day moving average as a stop loss.

U.S. Dividend Watch List: June 24, 2016

It was a wild week for the market as Brexit became a reality. The market fell -3.6% on Friday and closed the week -1.6% lower. Our team believes Brexit is a non-event for long-term equity holders. The world will not end so one should use this as an opportunity to build a basket of companies for the long run.  As an example, we are not aware of Nordstrom (JWN) having business any presence in England. Yet the stock was lowered by nearly 3% on Friday. Below are 29 companies on our watch list. Continue reading

U.S Dividend Watch List: June 3, 2016

Previous Year Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from May 29, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2013 Price 2014 Price % change
PG Procter & Gamble 77.43 82.47 6.5%
MUR Murphy Oil Corporation 42.30 30.40 -28.1%
UBA Urstadt Biddle Properties Inc 19.65 21.52 9.5%
STR Questar Corp. 21.17 24.97 17.9%
WMT Wal-Mart Stores 73.06 70.87 -3.0%
      Average 0.6%
         
DJI Dow Jones Industrial 17,849.46 17,807.06 -0.2%
SPX S&P 500 2,092.83 2,099.13 0.3%

The average gain for the top 5 companies slightly exceeded the market. The best performer was Questar (STR) and the largest decline came from Murphy Oil (MUR). We started our review with Procter & Gamble (PG) which gained +6.5% excluding the dividend. It's no secret that Procter & Gamble is a blue-chip name. Our commentary stated that downside risk was limited and research should be initiated at currently level. It's too bad that we didn't heed our own advice on this one.

Last year, Murphy Oil (MUR) was trading at its yearly low with a 3.30% dividend yield. When we wrote about Murphy last year, oil was trading around $60. However, the price tanked and hit a low at $26. The recent rebound brought the price back to $48 but remains more than -20% below where we were a year ago. Our assessment that oil price were closer to the bottom at the time was extremely wrong. One key thing to note is that Murphy didn't cut their dividend payout and as such, their current dividend yield is north of 5%. Despite the fact that Murphy can sustain their dividend, shares should be view as speculative given the negative net income outlook.

Wal-Mart (WMT) was trading just north of $73 and our team believed that if shares could hold above this level AND continue to raise thier dividend, it would be worth considering. One of the two criteria came to fruition when board of director approved a dividend hike from $0.49 to $0.50. Despite that, the company reported a dismal third quarter last year and the techinicals broke down which took the shares down as low as $56.30.

U.S. Dividend Watch List: June 3, 2016

The conventional wisdom of sell in May and go away didn't quite pan out. S&P 500 rose more than +2%. At the end of the week, our watch list contains 15 companies. Continue reading

U.S. Dividend Watch List: May 13, 2016

Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from May 15, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2013 Price 2014 Price % change
NSC Norfolk Southern Corporation 97.56 85.97 -11.9%
OTTR Otter Tail Corp. 26.97 29.73 10.2%
CTBI Community Trust BanCorp. 32.18 34.82 8.2%
BKH Black Hills Corp. 47.69 60.44 26.7%
GRC Gorman-Rupp Company 27.04 26.93 -0.4%
      Average 6.6%
         
DJI Dow Jones Industrial 18,272.56 17,535.32 -4.0%
SPX S&P 500 2,122.73 2,046.61 -3.6%

Watch List Review

The average gain from the top five companies was satisfactory. The average gain of 6.6% far exceed the decline in the Dow Jones Industrial and S&P 500. Black Hills (BKH) was the biggest contributor to the success. The South Dakota utility company earning was virtually flat for the year. We are not quite sure what driver pushed the stock higher by more than 25%. The only thing we can think of is the search for yield. Similarly, Otter Tail (OTTR), experienced similar rise in share price. As negative yield spread and the search for income continue, utility sector will be the sector which institutions turn to. This is only our thesis but one can look at Dow Jones Utility Average for confirmation. The index rose 14% while the Industrial fell 3.6%.

The biggest drag to the top five came from Norfolk Southern (NSC) which lost nearly 12% for the year. When shares were trading at $97 last year, we pointed that Value Line estimated fair value of $90 which turned out to be a wise call. Operating in rail industry can be profitable because of the oligopoly nature in the industry. However, it is capital intensive and can be very cyclical. The slow down in the energy sector has a large affect on the rail business.

Tiffany Co. (TIF) was one name we highlighted and took position. The purchase didn't pan out as well as we'd hope for. Originally when we purchased the stock in late April of 2015, shares were trading in the mid 80s. It quickly rose to $95 at the end of July before plunging to the current level. The thesis for this purchase is the brand value and double digit return on equity. Those factors remain in tact and we are evaluating whether additional position should be taken at this level.

U.S. Dividend Watch List: May 13, 2016

It was another volatile week with the S&P rose above 2,080 but closed the week below 2,050. The index lost 0.5% for the week and is virtually flat for the year. Weakness in the market is providing long term investor with more companies to comb through. Below are 24 companies on our dividend watch list for the week. Continue reading

U.S. Dividend Watch List: April 22, 2016

Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from April 24, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2013 Price 2014 Price % change
GRC Gorman-Rupp Company 27.99 28.95 3.4%
SAFM Sanderson Farms, Inc. 76.06 87.76 15.4%
TCO Taubman Centers 73.65 69.33 -5.9%
SJI South Jersey Industries 26.85 27.51 2.5%
DCI Donaldson 37.37 33.03 -11.6%
      Average 0.8%
         
DJI Dow Jones Industrial 18,080.14 18,003.75 -0.4%
SPX S&P 500 2,117.69 2,091.58 -1.2%

Watch List Review

The biggest gain came from a company unfamiliar to us, Sanderson Farms (SAFM). A year ago we said that this is a new company which we had no exposure to prior to the watch list. This small cap producer of poultry products had net earnings fall by -42% and yet the stock gained +15%! While one may view this as a disconnect in the fundamentals, another could argue that such expectations were baked into the price. When we published the list last year, shares were trading at $76 with projected net income of $7.05 which brings forward P/E to just 10x. Such low multiple imply that any miscalculation in the analysts' estimate (to the downside) would result in a strong recovery in share price. We believe this was the case with Sanderson Farms.

We wrote a quick note on Gorman-Rupp (GRC), which etched out a modest gain of +3%. However, that gain wasn't without some volatility. When we published the list, the stock was trading at $28. The shares traded below $20 in August (hit the low of $18.14 on August 22 but closed above $22). The reversal came the same day and shares traded as high as $32. We stated that shares were worth considering at such level but didn't have complete conviction over the name. However, if one was able to pick up shares on a two part trade, one would have done quite well within one year.

U.S Dividend Watch List: April 8, 2016

It was another strong week for the market as the S&P 500 rose +0.53% pushing the YTD gain at +2.3%. Because of that, there are only 9 companies on our watch list this week. We are not inclined to put new money to work at this point. However, the financial sector is appealing at the moment and any new money needs to be able to generate relatively safe income. Continue reading

U.S. Dividend Watch List: April 8, 2016

Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from April 10, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2013 Price 2014 Price % change
FAST Fastenal Company 40.01 47.13 17.8%
LNN Lindsay Corporation 75.19 67.78 -9.9%
MSM MSC Industrial Direct Co Inc 70.24 75.39 7.3%
DOV Dover Corp. 69.40 62.91 -9.4%
SJI South Jersey Industries 26.91 27.67 2.8%
      Average 1.7%
         
DJI Dow Jones Industrial 18,057.65 17,576.96 -2.7%
SPX S&P 500 2,102.06 2,047.60 -2.6%

Watch List Review

The average gain from our top five companies was reasonable given the overall environment. A gain of +1.70% was superior to a loss of -2.60% for the general market. The gain and loss ranged from +17.80% to -9.90%. The best performer with gain of +17.8% was Fasternal (FAST). The exceptional gain can be attributed to two factors, earnings growth and multiple expansion. Net income rose by +7%, from $1.66 to $1.77 over the past year. Earning multiples rose to 26 from 24. As icing on the cake, the dividend was increased by +7%, from $0.28 to $0.30. One outstanding statistic which highlighted the strong economic mode is Return on Equity (ROE). Below is what we said about Fasternal one year ago:

"Fasternal (FAST) currently yield 2.8% with P/E of 24. The stock is trading just 1.4% above its yearly low. For the last twelve months the company earn $1.66 per share and the consensus expects the net income to rise to $2.07 in 2016. The one fundamental number that attracts us is the return on equity. If the company earning $2.07 next year on $6.00 of book value, that equate to 34.5% ROE."

The worst performer was Lindsay (LNN). We all know that the agricultural sector was dragged down by deflationary forces and it clearly shown in the stock price. One year ago, LNN was trading at $75 and Value Line Investment Survey placed a fair value estimate at $77. However, the latest Value Line report has a price of $68, slightly below fair value of $69. Our valuation model suggests an extreme downside of $45 but long-term investors should start paying attention to Lindsay at the current price. Below is a highlight of our commentary on Lindsay.

Lindsay (LNN) provides agricultural equipment. While income investor may not be excited over 1.4% dividend yield, payout ratio of 30% ensure that income is relatively safe. Profit is expected to fall in 2015 from the last 12 months by 24% but is expected to recover in 2016. Value Line projects that the company trades at 16x cash flow with estimated fair value at $77.

U.S Dividend Watch List: April 8, 2016

The market gave ground this week and fell -1.2%. However, the correction wasn't big enough to make a substantial change in the watch list. Continue reading

U.S. Dividend Watch List: March 25, 2016

Prior Year Top Five Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from March 27, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2013 Price 2014 Price % change
PM Philip Morris International 76.79 97.57 27.1%
XOM Exxon Mobil Corp. 83.58 83.98 0.5%
CAT Caterpillar 79.67 75.29 -5.5%
MSM MSC Industrial Direct Co Inc 71.21 74.57 4.7%
PX Praxair 120.16 111.74 -7.0%
      Average 4.0%
         
DJI Dow Jones Industrial 17,712.66 17,515.73 -1.1%
SPX S&P 500 2,061.02 2,035.94 -1.2%

Watch List Review

The average gain for the top five companies was +4% which was better than the market. The best performer may be of a surprise to many, Philip Morris (PM) gained +27% in the year. Of the five companies, the largest decline of -7% came from Praxair (PX). We highlighted three companies and would like to bring to light what we said about Exxon Mobile (XOM). Below is an excerpt from that post.

As one look beyond the short term and see what the market has offered us, the investment opportunity looks even more compelling even in the mist of the bad news. Valueline placed a fair value at $75 for 2016 which is roughly 10% below the current level. Although Valueline estimated earning and cash flow per share to fall, dividend is projected to rise 5% and 4% from 2015 and 2016 respectively (head to Valueline for complimentary research report on Exxon). IQTrend estimated that the company is undervalued at 3.2% yield and current yield of 3.3% suggests that we are much closer to the bottom than the top. Don't expect the stock to pop in the short term and may have more downside to go. Multiple purchases is likely the best approach for long-term investor.

U.S Dividend Watch List: March 25, 2016

Below are 26 companies appearing on our dividend watch list for the week. Continue reading

U.S. Dividend Watch List: March 4, 2016

Top Five Watch List Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from December 5, 2014 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2014 Price 2015 Price % change
XOM Exxon Mobil Corp. 85.63 82.29 -3.9%
MSM MSC Industrial Direct Co Inc 72.16 70.34 -2.5%
GAS AGL Resources Inc. 47.11 64.80 37.6%
GTY Getty Realty Corp. 17.09 18.36 7.4%
SJI South Jersey Industries 26.18 26.44 1.0%
      Average 7.9%
         
DJI Dow Jones Industrial 17,856.78 17,006.77 -4.8%
SPX S&P 500 2,071.26 1,999.99 -3.4%

Watch List Review

Average gain for the top five companies were 7.9% which far exceed the S&P 500 and Dow Jones Industrial. The best performer was AGL Resources (GAS) which gained 37.6% driven by an aquisition by Southern Co. (SO).

Two companies with negative return were Exxon Mobil (XOM) and MSC Industrial (MSM). Our commentary on both companies were bullish and we took positions in Exxon about one year ago. Below are excerpt from last year.

Exxon Mobil (XOM) is the larger oil explorer and producer who need no introduction. The stock not only hit its 1 year low but also trading near its 2 years low. Back in October 2013, the stock marked the low at $84.79. Long-term investor without a position in the stock with focus on income and capital appreciation may want to start their due diligence. The drop in oil price may be one reason the stock has fallen but if you refer back to our post from February 20, we've highlighted that such correlation has little merit than one might believe. However, our view may be bias as we've acquired more Exxon in February.

MSC Industrial Direct (MSM) was founded in 1941 and manufactures and markets various industrial products such as abrasives and fasteners which are part of a larger category known as maintenance, repair, and operations (MRO). While the company isn't a dividend achiever, it has great dividend record which started in 2003. Since 2004, the dividend has grown at an annual rate of 16% excluding two special dividend that was paid out within that time frame. The company earned $3.74 on $20.26 of book value which is equivalent to 18% ROE. Such high ROE is favorable in the economic such as the one we are in because it imply wide economic moat. Charlie Munger once said that owning a great business at a fair price is better than owning a mediocre at a discount price thus we are beginning to look at company that can maintain exceptionally high ROE over a period of time.

Overall, we are content about our assessment of both companies even when they did not outperform the market. Despite oil falling -28%, Exxon was able to weather the storm and managed to loss only -4%. MSM Industrial was virtually flat on price as well as net income. The stock dipped as low as $54.19 and rebounded +30%. The street is expecting net income to grow by 10% over the next year.

U.S. Dividend Watch List: March 4, 2016

The recent rally in the market has taken many companies trading at or near their yearly low upward. Below are 13 companies that made the cut this week. Continue reading

U.S. Dividend Watch List: February 12, 2016

It was another wild week for the market with extreme volatility setting in. The market ended the week down -0.80% and is off by -8.70% year-to-date. USO which is a proxy for oil fell -19% for the year while IAU which is a proxy for gold rose +16.70%. While weakness in the market may bring anxiety to investors, those with a longer-term perspective should embrace the recent trend and move towards a net buyer stance. At the end of the week, there are 30 companies on our watch list. Continue reading

U.S. Dividend Watch List: January 22, 2016

Top Five Watch List Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from January 23, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2013 Price 2014 Price % change
NUE Nucor Corp. 43.80 35.36 -19.3%
EMR Emerson Electric 58.12 43.17 -25.7%
ITT ITT Corp 36.08 31.00 -14.1%
MCD McDonald's Corp. 89.56 118.40 32.2%
HY Hyster-Yale Materials Handling, Inc. 64.75 48.95 -24.4%
      Average -10.3%
         
DJI Dow Jones Industrial 17,672.60 16,093.51 -8.9%
SPX S&P 500 2,051.82 1,906.90 -7.1%

Watch List Review

Our top five lost an average of -10.3%. The best performer was McDonald (MCD) which gained an astonishing +32.2%. The driver for their success may be from menu changes (see here). We had some comments on Nucor (NUE) and Hyster-Yale (HY) which lost -19.3% and -24.4% respectively. Excerpts below were taken from our post from last year.

"Nucor (NUE) has lost -6.6% YTD and is trading right at the 52-week low. The company manufactures and sells steel and steel related products. The company recently raised their dividend by +0.05%. The small increase was a wise move because it kept the company on Dividend Achiever list while maintaining their cash position for the rocking time ahead. Interestingly, analysts at Goldman Sachs upgraded the stock to Buy from Neutral but lowered the price target to $52 from $55. The stock is trading at a slight discount to its 5-year average on all matrix (according to Morningstar). The stock is definitely worth considering at this level."

"One company that peaked our interest is Hyster-Yale (HY). The company was a spin-off from another Dividend Achiever, NACCO Industries, in 2012. Hyster-Yale manufactures forklifts. In less than one year, the stock has fallen from the high of $108 to settle at $65 by the end of the week, a -40% decline. Because Hyster-Yale is relatively young as a standalone company, we have little history on its financial. The stock currently trades at just 10x earnings with dividend yield of 1.6%. The company's balance sheet is strong with $39M in total debt while holding $97.9M in cash. Debt to equity ratio sits at 8.25. Hyster-Yale brings in $2.8B in revenue with net income of $109M or 3.9% profit margin. A razor thin margin is a cause for concern given that the company operates in a highly cyclical industry. However, current valuation is worth your consideration. The market cap is at $1B which is just 0.38x of sales."

Even though our speculation that these two would rise didn't come to fruition, this review provided us with an opportunity to reassess these two companies at a lower price. Although Nucor now yield 4.3%, it's payout ratio is high at 77%. Analysts are expecting the company net profits to be at $1.55 for the current year. With current earnings at $1.50, dividend increase will be put to question. Hyster-Yale currently sports a 2.37% dividend yield. Additionally, the payout ratio is 22% which is a large margin for safety for investors. While analysts expect their profits to fall, HY should be able to sustain the dividend if not increase it slightly.

U.S. Dividend Watch List: January 22, 2016

The S&P 500 continued to fluctuate between 1,820 and 1,900. Oil still hasn't hit bottom and commodities continued to slide lower. We see additional bearish sentiment as an opportunity to accumulate shares. Below are 41 companies on our watch list. Continue reading

U.S. Dividend Watch List: March 20, 2014

The market roared back this week and pushed the S&P 500 above the 2,100 mark once again. The Nasdaq also closed the week above 5,000. However, the energy market continued to be in turmoil. Light sweet crude closed the week at $46.45 thus you will likely see many energy and industrial companies on our watch list. All-in-all, there are 54 companies that are on our watch list this week. Continue reading

NLO Dividend Watch List: March 9, 2012

It was a volatile week but the market finished unchanged.  There are some bargains to be had in our Dividend Watch List this week which contains 11 companies that are within 11% of the 52-week low. A reminder to our readers, these are companies with long historical track records of dividend payments and increases.

Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
TR Tootsie Roll Industries 22.63 2.31% 30.58 0.74 0.32 1.41% 43%
CHRW C.H. Robinson Worldwide 66.35 6.50% 25.32 2.62 1.32 1.99% 50%
CLX Clorox Co. 67.91 7.69% 16.56 4.1 2.40 3.53% 59%
PEP PepsiCo Inc. 63.15 7.95% 15.67 4.03 2.06 3.26% 51%
ANAT American National Insurance 71.49 8.80% 11.10 6.44 3.08 4.31% 48%
ATO Atmos Energy Corp. 31.09 9.05% 14.07 2.21 1.38 4.44% 62%
HNZ HJ Heinz Co. 53.06 10.27% 17.69 3 1.92 3.62% 64%
WAG Walgreen Co. 33.48 10.35% 11.31 2.96 0.90 2.69% 30%
BDX Becton, Dickinson 76.82 10.39% 14.02 5.48 1.80 2.34% 33%
CWT California Water Service 18.43 10.69% 20.48 0.9 0.63 3.42% 70%
MATW Matthews International  31.65 10.78% 13.08 2.42 0.36 1.14% 15%
11 Companies

Watch List Summary

Topping our list this week is Tootsie Roll (TR) which took a hit in the last month, down 2.6%. Our suspicion is that the recent rise in input costs (commodities such as sugar and cocoa) has hampered the growth of TR.  In the short-term, companies are not able to adjust their prices faster than their input costs, thus pressuring their margins in the short term. Value Line's estimated fair value for TR is around 19x cash flow which places the 2012 stock price at $20.90. After reviewing the historical range for TR, we see the worst case scenario at 15x cash flow. Therefore, our downside target is $16.50.

There are several companies on this list that have hit what IQTrends (www.iqtrends.com) considers “undervalued”. These are Clorox (CLX), Pepsi (PEP), Walgreen (WAG), and Becton (BDX). Based on their dividend yield thesis, the estimated upside are 26%, 48%, 92%, and 17% for these respective companies.

We are convinced that Walgreen (WAG) can emerge out of the Express Script deal better than expected. There’s no doubt that Walgreen's earnings will be hurt but we believed that many of these factors are priced into the stock. As such, our model places Walgreen fair value at $51. Value Line estimated that Walgreen trades at or around 11.5x cash flow which would put the intrinsic value at $50. We believed that the downside risk for the stock is around $30 level.  The technicals also support our claim as the shares have a 1-year low of $30.74.  In addition, we are anticipating a crossing over of the moving averages which should act as a buying case for the bulls. In any event, the dividend yield is at its highest point in history with a very low payout ratio. We feel comfortable holding a large amount of WAG in our portfolio.

WAG

Top Five Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from March 11, 2011 and have check their performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2011 Price 2012 Price % change
HCBK Hudson City Bancorp, Inc. 9.92 6.79 -31.55%
SYY Sysco Corp. 27.83 29.93 7.55%
SHEN Shenandoah Telecom. 16.01 10.35 -35.35%
BMI Badger Meter, Inc. 37.68 32.01 -15.05%
WABC Westamerica BanCorp.  50.25 47.32 -5.83%
Average -16.05%
DJI Dow Jones Industrial 12,044.40 12,922.02 7.29%
SPX S&P 500 1,304.28 1,370.87 5.11%

Companies on our watch list got hammered. Especially Hudson City (HCBK) and Shenandoah (SHEN). We said the following about Hudson City:

"On the top of our list this week is Hudson City Bancorp (HCBK). The stock has been under pressure this week. Current yield of 6% is attractive but with nearly $30B of debt and only $650M of cash on hand, it many not be worth risk/reward..."

We're glad that our intuition was right about the company and didn’t take any positions in the stock. Shenandoah paid an annual dividend which we were not fond of. As such, the name never attracted us. We highlighted Sysco (SYY) and Target (TGT) which rose 7.5% and 12.7% respectively.